5 Ways Sustainability Provides Value When Selling Your Company
Financial performance and trends are the core of discussions in business transactions. However, non-financial issues involving environmental, social, and other economic issues also make up an important part of your business. Sustainability involves “triple bottom line” reporting of these three areas.
Management of non-financial issues can make an impression that influence the value a buyer is willing to pay for your company. Programs that are unfocused, ad hoc – or don’t exist – can create uncertainty, resulting in lower sales price or other concessions. Sellers with Sustainability programs can gain advantage, especially if they understand the value of Sustainability in the context of a transaction. Sellers can achieve value from sustainability if they can answer these five questions:
- Do you have a triple bottom line? What are the environmental, social, and [non-financial] economic aspects that impact your company? Do they affect your operations, your supply chain, or your products or services? Are the effects positive, negative, or undetermined? What key performance indicators do you use to evaluate your performance? A small or medium-sized company need not have the kind of mature, sophisticated Sustainability management or reporting system that global companies have – but any company can have a Sustainability management framework appropriate to their size, sector, and maturity.
- Describe a notable Sustainability accomplishment. By the time you are ready to sell a company, you should have at least one Sustainability accomplishment under your belt. You may have reduced energy in your facilities, reduced packaging in a product, or sourced products from fair-trade locations. Develop key performance indicators (KPIs) that convey benefits, both one-time and ongoing. If the project(s) have translated into financial performance, such as reduced operating costs or increased market share, be sure to specify this.
- How have you managed your Sustainability risks? Stakeholder expectations for non-financial issues are very dynamic. A social media campaign, viral video, or negative customer campaign can damage your brand, and reduce sales price for your company. Know the two or three Sustainability aspects that pose risk to your company, and be able to describe your approach to managing these risks.
- What are your top-line market opportunities? Company’s initial Sustainability projects typically focus on reducing costs (energy savings), or on ad hoc social activities (employees’ volunteer hours in the community). Sustainability can drive top-line revenue growth, too. The ecology- or socially-minded consumer could be drawn to your products or services – but only if the distinctive benefits are identified, supported, and effectively marketed. What additional resources could you use to achieve these?
- Be Ready. If you convince a prospective buyer that you understand risks and opportunities of Sustainability for your company, and if you paint a compelling picture of additional value that can be derived from Sustainability in the future, this becomes another positive valuation consideration – and more money for your business. Better yet – don’t wait for a buyer to ask for it. Make this a part of your prospectus, and the talking points during your discussion.
What do you think? We’d like to see your comments and questions below!
Category: Business Growth & Strategy Financials
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Definitely an important topic as more and more companies are trying to quantify the ROI of sustainability initiatives/efforts.